Economy
State Governments Borrow N900bn from Capital Market—SEC
By Ahmed Rahma
The Director-General of the Securities and Exchange Commission (SEC), Mr Lamido Yuguda, has disclosed that the state governments in Nigeria have borrowed not less than N900 billion from the capital market.
Mr Yuguda made this disclosure on Tuesday at a webinar organised by the Nigerian Stock Exchange (NSE) on ways sub-nationals can raise funds through the sale of state-owned enterprises.
The SEC chief, who was represented by the Executive Commissioner in charge of Legal and Enforcement, Mr Reginald Karawusa, disclosed that this amount was raised from the market through debt issuances since 1978.
Speaking on Privatisation in Nigeria and the Outlook for Subnational Economic Development, the theme for the event organised in partnership with the Nigeria Governors’ Forum (NGF) and the Nigerian Investment Promotion Council (NIPC), the DG said “a significant part of these funds were deployed to finance capital projects across the country.”
“However, the ability of states to continue to borrow in a sustainable manner has been severely impacted in recent times.
“With the huge infrastructure gap, decreased allocation from the federal purse owing to relatively low oil revenue and the depressed level of internally generated revenues, states are barely able to pay salaries after servicing their outstanding loan obligations,” he noted.
He added that, there is indeed no better time to discuss alternative funding sources at the sub-national level given adverse impacts brought about by the COVID-19 pandemic.
“The capital market’s primary role in any economy is to facilitate capital formation. By creating a system for allocation of capital, investors are able to price risk efficiently while issuers have the opportunity to raise funds to finance projects. In doing so, issuers may choose to raise equities or debts,” he mentioned.
The DG also stated that the federal and state governments have the capabilities to unlock enormous potentials through privatisation, which he said “is an avenue for governments to unlock economic potentials inherent in government-owned enterprises.”
“The focus on Nigeria’s journey on privatisation has largely been on the Federal Government. There have been several phases of privatisation exercises in the past with an emphasis on enterprises operating in different sectors of the economy including oil and gas, hospitality, mining etc,” Mr Yuguda added.
He also stated that, “Several enterprises are still owned and controlled by the government, both at the state and federal levels. A number of these entities have the capacities to generate cash flows and corporate profitability.
“However, owing to certain inefficiencies, these entities are underperforming and in some cases subtracting from value. Perhaps this is the time for state governments to revisit the privatisation value proposition. There are several benefits to privatisation.”
Mr Yuguda informed the participants that privatisation has numerous benefits as the proceeds from the sale of government interest in these enterprises would help augment budget shortfalls and can be applied towards funding critical infrastructure.
“Beyond the funds to be generated, governments will enjoy the cost of savings as there would be no further requirements to fund these entities post-privatisation.
“There are further benefits to be enjoyed through the taxes that would be paid in the future by those entities. As they undergo a strategic transformation and become positioned for profitability, these entities are able to create jobs and employ residents of their host states, facilitate infrastructure development and further positively impact the economy in other areas,” he concluded.
The CEO of the NSE, Mr Oscar Onyema, in his address, said privatisation occupies a critical position in economic globalisation and provides an avenue for raising the bar towards economic development.
“Given COVID-19, there is no better time to re-visit privatisation and cascade this to the subnational levels,” he added.
Also speaking, the Chairman of NGF, Mr Kayode Fayemi, said the state governments have been constrained to increase spending in a bid to mitigate the effects of the pandemic.
According to him, “containment is fairly in place but more needs to be done to ensure progress is not lost and that is where privatisation comes in.
“If the private sector takes over in critical sectors, state governments can focus on education and health among others”.
By Dipo Olowookere
Transactions on the floor of the Nigerian Exchange (NGX) Limited rallied on Tuesday by 0.75 per cent after investors intensified their demand for local stocks.
It was a tough battle between the bulls and the bears during the session, but the former overcame by a whisker after the bourse recorded 29 appreciating equities and 28 depreciating equities, indicating a positive market breadth index and strong investor sentiment.
The growth posted by Customs Street yesterday could be attributed to the appetite for MTN Nigeria shares, which chalked up 10.00 per cent to settle at N256.30.
SCOA Nigeria appreciated by 9.93 per cent to N2.99, Omatek grew by 9.88 per cent to 89 Kobo, Universal Insurance rose by 8.70 per cent to 75 Kobo, and CAP gained 8.52 per cent to trade at N47.75.
Conversely, Secure Electronic Technology lost 9.88 per cent to quote at 73 Kobo, Abbey Mortgage Bank declined by 9.09 per cent to N3.30, Sunu Assurances tumbled by 8.21 per cent to N6.15, Deap Capital slumped by 7.08 per cent to N1.05, and C&I Leasing depreciated by 6.82 per cent to N4.10.
A total of 440.3 million equities valued at N12.0 billion exchanged hands in 13,087 deals compared with the 1.3 billion equities worth N17.7 billion transacted in 13,891 deals on Monday, representing a decline in the trading volume, value and number of deals by 66.79 per cent, 32.20 per cent and 5.79 per cent, respectively.
Lasaco Assurance ended the session as the most traded stock after it sold 108.1 million units valued at N338.7 million, Access Holdings traded 44.0 million units for N1.1 billion, UBA exchanged 27.9 million units worth N945.7 million, Zenith Bank transacted 26.7 million units for N1.3 billion, and Universal Insurance traded 22.7 million units valued at N16.7 million.
On Tuesday, the insurance, banking and industrial goods sectors jumped by 1.03 per cent, 0.30 per cent, and 0.03 per cent, respectively, and the consumer goods and energy counters lost 0.38 per cent and 0.36 per cent apiece.
The All-Share Index (ASI) went up yesterday by 767.63 points to 103,137.99 points from 102,370.36 points and the market capitalisation increased by N472 billion to N63.333 trillion from N62.861 trillion.
By Adedapo Adesanya
Nigeria ranked as Africa’s leading destination for upstream oil and gas investment in 2024, new research from market intelligence firm, Wood Mackenzie, has shown, accounting for three out of four Final Investment Decisions (FIDs) announced by global oil and gas majors, totaling $13.5 billion.
The FIDs announced within the Nigerian market included Shell’s $122 million investment in the Iseni Gas Project, TotalEnergies’ $566 million commitment to the Ubeta Gas Project and Shell’s approval of the Bonga North Tranche 1 project valued at around $5 billion.
According to the Special Adviser to President Bola Tinubu on Energy, Ms Olu Verheijen, these investments reflected Nigeria’s ongoing efforts to unlock its hydrocarbon potential through investor-friendly policies and strategic global partnerships.
Last year, Nigeria introduced several initiatives to create a conducive environment for oil and gas investors, including new tax incentives aimed at attracting up to $10 billion in natural gas investments.
Nigeria, which is Africa’s largest oil producer, also offered tax relief for gas investors, reducing corporate income tax and extending capital allowance benefits – for deepwater gas projects.
Other policies include the Presidential Directive on Local Content Compliance Requirements 2024 to address the reduction in oil and gas investments caused by high operating costs compared to global markets.
Also, the Presidential Directive on Reduction of Petroleum Sector Contracting Costs and Timelines 2024 reduces the time spent to award contracts for oil and gas projects.
In addition to the directives, Nigeria also launched its 2024 oil and gas licensing round, offering 19 blocks for exploration, demonstrating its commitment to continued collaboration with local, regional and international partners.
Market analysts note that with this momentum, further FIDs are anticipated, including TotalEnergies’ expected $750 million commitment to the Ima Shallow Gas Project in 2025.
By Adedapo Adesanya
The NASD Over-the-Counter (OTC) Securities Exchange recorded a 0.22 per cent decline on Monday, January 20, with the market capitalisation shedding N2.35 billion to close at N1.073 trillion compared with the preceding session’s N1.075 trillion and the NASD Unlisted Security Index (NSI) going down by 6.79 points to wrap the session at 3,105.12 points compared with 3,111.91 points recorded in the previous session.
It was observed that the loss recorded on the first trading day of the week was triggered by UBN Property Plc, which crashed by 20 Kobo to trade at N2.00 per share versus last Friday’s N2.20 per share.
However, the share price of Industrial and General Insurance (IGI) Plc went up by 4 Kobo to 40 Kobo per unit from 36 Kobo per unit, it could not stop the bourse from going down at the close of transactions.
The activity chart showed that on Monday, the volume of securities traded by investors increased by 57.9 per cent to 767,610 units from the 486,215 units traded in the preceding session, while the value of shares traded yesterday slumped by 17.7 per cent to N2.3 million from the N2.8 million recorded in the preceding trading day, as the number of deals declined by 14.3 per cent to 12 deals from the 14 deals carried out in the previous trading day.
At the close of transactions, FrieslandCampina Wamco Nigeria Plc remained the most active stock by value on a year-to-date basis with the sale of 4.1 million units worth N162.9 million, followed by Geo-Fluids Plc with a turnover of 9.1 million units valued at N44.0 million, and 11 Plc with the sale of 55,358 for N14.5 million.
Also, Industrial and General Insurance (IGI) Plc closed the day as the most active stock by volume on a year-to-date basis with 25.3 million units sold for N5.9 million, Geo-Fluids Plc came next with 9.1 million units valued at N44.0 million, and FrieslandCampina Wamco Nigeria Plc with 4.1 million units worth N162.9 million.
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